Builders Risk vs Homeowners
Builders risk covers a home under construction. Once you own and occupy it, you need a homeowners policy instead.
Free to compare
When construction ends
Builders risk stops making sense the day you close and move in. A homeowners policy picks up from there. It covers the finished house, your belongings, and your liability if someone gets hurt on the property. Your lender wants this in place before closing, not after.
What your lender requires
Most lenders want proof of homeowners coverage, often called a binder, dated to start on or before closing day. They usually require dwelling coverage at least equal to the loan amount, sometimes the full rebuilding cost. Your loan estimate or closing disclosure should say what they expect.
Not the sale price
What you paid for the house has nothing to do with what it costs to rebuild it. Dwelling coverage is based on rebuilding cost. That depends on local labor and materials, not the market. An agent or the insurer can help calculate this figure for your specific house.
Your deductible and escrow
Your deductible is what you pay out of pocket before coverage kicks in on a claim. Choosing a higher one usually lowers what you pay for the policy. If your lender escrows for insurance, your annual premium gets added to your monthly mortgage payment automatically.
Dwelling coverage set too close to the loan amount can leave you short if the house actually needs to be rebuilt, since labor and materials cost more than the loan ever accounted for. Before closing day locks you into a policy, it's worth checking what else is out there. Comparing quotes now costs nothing and still leaves time to fix the number before your lender sees the binder.
What if the house was still being built when you bought it
If you bought a new construction home, there may have been a builders risk policy on it already, usually held by the builder or the general contractor, not you. That policy protected the structure while it was being framed, wired, and finished. It ends when the builder's work is done, which is often at closing or shortly after. It was never meant to protect you as the owner living in the house.
The timing isn't always clean. If you're closing on a house that was finished a few weeks ago, the builder's policy may have already lapsed, leaving a gap before your homeowners policy starts. If you're closing the same day construction wraps, ask when the builder's coverage actually ends. Don't assume one policy hands off to the other automatically. They're separate policies from separate companies, and nobody is tracking that handoff for you.
The same rebuilding cost question from construction still applies once you own the place. A newly built house has known materials and recent labor costs, which usually makes it easier to set dwelling coverage accurately than it would be for an older home. Builders can often provide the actual construction cost breakdown, which is a useful starting point for your insurer. That figure still isn't the same as what it would cost to rebuild the house later if prices had moved.
Check whether anything was added after the builder's policy was priced, like upgraded flooring, a finished basement, or landscaping. Builders risk policies are often written to a fixed construction budget, and anything added afterward needs to show up in your homeowners dwelling coverage instead. If your closing date shifts, confirm your homeowners binder shifts with it too. A binder dated for the original closing day doesn't automatically cover a delayed one.
What happens if you buy a house that's still being finished
If you're buying new construction, there's a good chance a builders risk policy already exists on the house, usually held by the builder or general contractor rather than you. That policy covers the structure while it's being framed, wired, and finished out. It ends when the builder's work is done, which is often at or shortly after closing. It was never written to protect you as the person who's going to live there.
The handoff between that policy and yours isn't automatic, and the timing can get messy. If the house was finished a few weeks before your closing date, the builder's coverage may have already lapsed, which leaves a gap before your homeowners policy starts. If construction wraps the same day you close, ask the builder directly when their coverage ends. Builders risk and homeowners insurance come from separate companies that have no reason to coordinate with each other, so nobody is checking that one picks up where the other leaves off.
Setting dwelling coverage on a new build is usually more straightforward than on an older house, since the materials and labor costs are recent and known. Builders can often give you an actual cost breakdown from construction, which is a solid starting point for your insurer. But that number reflects what it cost to build the house then, not necessarily what it would cost to rebuild it later if prices move. It's a starting point, not the final answer.
It's also worth checking what's changed since the builder's policy was priced out. Builders risk coverage is often written to a fixed construction budget agreed on early, so upgraded flooring, a finished basement, or landscaping added afterward may not be reflected in that number. Those additions need to show up in your homeowners dwelling coverage instead. And if your closing date gets pushed back, don't assume your homeowners binder moves with it automatically. A binder dated for the original closing day may not cover a delayed one, so confirm the start date matches whenever closing actually happens.
Before you sign anything
Check that your binder's start date matches your actual closing day, and that dwelling coverage reflects rebuilding cost, not the loan amount or sale price. Both are easy to get wrong once, and hard to fix after.
